Privatization Can Transform the Delivery of State Psychiatric Services
By Leonard Gilroy • Jan 5th, 2009 • Category: Government Reform, Top StoryGovernor Kaine’s package of budget cuts includes proposals that may foster a paradigm shift in how the Commonwealth delivers mental health services. Calling Virginia a “dinosaur,” Gov. Kaine noted how other states have embraced the advice of many in the mental health profession by transitioning most psychiatric patients out of state institutions and into community-based care centers closer to family members and social and economic opportunities. To this end, the Governor’s budget includes proposals to close bzeoth the Commonwealth’s Center for Children and Adolescents (a juvenile psychiatric home in Staunton) and the Southeastern Virginia Training Center (an adult psychiatric facility in Chesapeake), shifting those facilities’ patients to community care and reducing the number of institutionalized Virginians by almost one-third.
Gov. Kaine’s proposals are a sensible approach, but the state operates over a dozen other psychiatric facilities, so there’s an opportunity to go much further. As one innovative project in Williamsburg—plus others in Florida, Georgia, and elsewhere—demonstrates, innovative policymakers around the country are increasingly turning to privatization to dramatically improve the quality of mental health services while holding down costs.
The Virginia Department of Mental Health, Mental Retardation and Substance Abuse Services currently operates sixteen mental health and other residential treatment facilities, including Williamsburg’s Eastern State Hospital (ESH)—the nation’s first public psychiatric hospital dating back to 1773. By the late 1990s, conditions at ESH had deteriorated to the point that it became the subject of a U.S. Justice Department lawsuit to rectify substandard care and living conditions.
To turn things around, the Department initiated a large-scale ESH modernization project facilitated by an innovative public-private partnership. This multi-phase project involves partnering with a private contractor to consolidate 26 buildings into six; deliver new, state-of-the-art facilities; and develop a strategic plan for surplus acreage. The first phase of the project—the new Hancock Geriatric Treatment Center—opened in April 2008 and recently won an innovation award from the National Council of Public-Private Partnerships. The next phase of the ESH modernization—a new adult mental health treatment center—is set to open in 2010.
One of the more notable aspects of the ESH modernization is that the initiative did not come from within, but was received as an unsolicited, private sector proposal for turnkey development submitted under the state’s Public-Private Education Facilities and Infrastructure Act (PPEA).
The contractor is not only delivering the new facilities on an accelerated schedule, but because of the more efficient use of space on the campus and the patient-centric design of the new facilities, the partnership will deliver where it really counts—improving patient care, outcomes and safety.
While this project demonstrates a significant advance in Virginia, the potential for further innovation in service delivery is now prominently on the horizon. In October 2008, for example, the District of Columbia’s Department of Mental Health announced that it would be closing all of its mental health centers and replacing them with privately-run facilities, expanding the number of patients treated while generating tens of millions in cost savings.
Georgia is pursuing a similar initiative on a much larger scale. Like many states, Georgia faces rapidly escalating costs to maintain its aging mental health facilities. At the same time, the state has also become the focus of a U.S. Justice Department investigation into civil rights violations after the Atlanta Journal-Constitution exposed appalling conditions in Georgia’s state-run mental hospitals. Since 2002, the paper found that over 130 patients have died from neglect, abuse or poor medical care in the state-run facilities, and there have been nearly 200 cases of patient abuse.
To clean up its act and avoid a federal civil rights lawsuit, Georgia’s Department of Human Resources plans to privatize the operations and management of all of its state psychiatric hospitals. The initiative would close all seven of its existing state hospitals and replacing them with three new, privately-financed, privately-operated facilities—all by 2012. The central goal of the privatization initiative is to dramatically improve service quality and patient outcomes while lowering spending from current levels.
The Georgia and D.C. cases should dispel the myth that providing care to psychiatric patients is somehow an “inherently governmental” function. Just look at Florida, which has been the state leader in mental health services privatization.
Florida’s efforts began in November 1998 when it contracted with a private company to operate South Florida State Hospital, an aging, non-accredited facility which was facing a major class action lawsuit concerning patient abuse and poor conditions. Within two years the private operator achieved accreditation for the existing facility (removing the lawsuit), while at the same time financing and building a new, modern facility to replace it. No capital dollars were involved and the state will own the new facility when the debt is retired.
The results speak for themselves—after privatization, the hospital reached some significant operational milestones, such as eliminating waiting lists for patient admissions, reducing the average patient stay from eight years to less than one year and nearly eliminating the use of seclusion and restraints to manage patient behavior. Cost savings in Florida have also been impressive. The state’s Department of Children and Families reported to a legislative committee in 2007 that the average cost per bed in the privately operated facilities was as much as 15 percent lower than at the state-run hospitals.
Virginia’s success with the Eastern State Hospital project is a great stepping stone to a larger transformation of psychiatric services delivery. That project has proven that private sector innovation can deliver high-quality psychiatric facilities; the next step for the Commonwealth is to extend that model further into operations, along the lines of Florida and Georgia.
In this sort of arrangement, the state would negotiate a performance-based contract that would establish care standards and performance mandates (with appropriate financial penalties for non-compliance) to ensure a higher level of service than achieved under state operation. The state’s role then shifts to contract monitoring and holding the operator accountable for results.
Moving forward, Virginia policymakers need to ask a critical question: does the Commonwealth need to be in the business of running hospitals, or could it achieve better outcomes at a lower cost through contracting for performance with experienced private sector operators? The experience in Florida and elsewhere strongly suggests the latter approach may be the best answer in Virginia.
Leonard Gilroy is the Director of Government Performance at Reason Foundation, a nonprofit think tank advancing free minds and free markets, and Senior Fellow for Government Reform at the Thomas Jefferson Institute for Public Policy. A certified urban planner (AICP), he researches privatization, government reform, transportation, and urban policy issues.
Prior to joining Reason, Gilroy was a Senior Planner at a New-Orleans-based urban planning consulting firm. He also worked as a research assistant at the Virginia Center for Coal and Energy Research at Virginia Tech. He earned a B.A. and M.A. in Urban and Regional Planning from Virginia Tech.
Gilroy edits the world's most respected newsletter on privatization, Privatization Watch and the widely-read Annual Privatization Report, which examines trends and chronicles the experiences of local, state, and federal governments in bringing competition to public services.
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This is an interesting piece, full of promise. But it seems long on generalities and short on specifics. How exactly has privatization saved cost in what is a very high cost treatment area, and one where clinical outcomes are not as easily predictable as other areas of medicine? What is the medical community’s assessment of this approach? Reducing inpatient stay lengths and costs are certainly admirable, but not if they come at the cost of returning people to the streets without proper support and ongoing case management.
One of the challenges of making the treatment of mental health conditions more successful has to do with diagnosis and treatment plans. At present, both vary significantly based on where you are. I am aware of the case of one family member whose initial treatment for bipolar disorder in Montana, was characterized by frequent counseling, heavy prescription of drugs and a seemingly endless series of short hospital stays (short stays made the insurance company happy), all of which caused substantial disruption to the household, ability of to patient to care for herself, her family or her work outside the home, and none of which resulted in meaningful improvement in the patient’s condition. By comparison, after a single, eight-week inpatient treatment at a more progressive facility in Boston (8 extremely costly weeks funded largely by family resources when the insurer wouldn’t), the patient was completely de-toxed from the mood drugs and sent home on a even keel with coping techniques that have kept her out of the hospital and able to care for herself for a number of years.
Virginia’s history of devolving mental health services to communities has been particularly checkered by inadequate funding, resulting in more and more acute mental health cases falling through the cracks and harming themselves and others until they become wards of the criminal justice system. (If you lived in Richmond in the 70s you’ll recall how many marginally managed mental health patients discharged from state facilities were funneled into boarding houses on West Grace Street so that legislators would be compelled to see first hand the real complexion of “community services” when they drove out of the State Capitol.) I’ve interviewed heads of community service agencies throughout the state who are driven at times by little more than their passion for helping sick people in the face of the challenges their agencies face.
So as we contemplate the idea of reducing the size and structure of mental health treatment, let’s not do so without giving fair time to the clinical outcomes. And let’s not lose sight of the fact that state mental health facilities, like public schools, frequently end up with the tough cases that didn’t have the benefit of private insurance and earlier diagnosis and treatment.
In the meantime, though, thank for raising these points and encouraging conversation on this topic.
There is a great deal more to this story. I, for one, believe that equal time should be given to the opposing side of the story, supported by mental-health professionals from across the State, Virginia Tech families, parents of former and current patients, and even former CCCA patients themselves.
In the shadow of the VA Tech tragedy, when the State had vowed fix a system the had allowed a troubled young man – Cho Seung Hui – to “slip through the cracks” – the Governor of Virginia is about to “dynamite” one of those cracks into a verible “chasm”, creating a lack of vitally-needed services for some of Virginia’s most troubled young people.
State officials have been perpetuating the myth that these children can be easily absorbed by private hospitals, and community-based agencies. The fact is that the majority of the children and adolescents admitted to the CCCA have either been denied admission to – or have been transferred out of these other facilities; due to either aggressive, violent behavior that these community-based agencies and private institutions have been unable to manage; or as a result of their having no private insurance (and yet not being eligible for Medicaid. It is a common practice for these private hospitals to transfer children out of their facility and to the CCCA as soon as their insurance benefits have been exhaused.
The Center treated 608 patients in its 48-bed facility in 2008, and was expected to serve 650 in 2009, before word of this closure was announced. In these troubled economic times, with so many families experiencing increased stress, the number of children needing such treatment is only expected to get larger in the new year. This facility serves children and adolescents from all over the state.
It must be understood, that while the state of Virginia has many large psychiatric hospitals for the care of adult patients, the Commonwealth Center is the only such facility within the entire state that accepts children and adolescents. It has long served as the “safety net” for children without insurance; for unpredictably agressive and violent children; and for children facing legal charges, who have been court-ordered to have mental-health evaluations before continuing with the legal proceedings against them.
How often an adolescent child has been admitted to the Commonwealth Center after being arrested and charged with a crime, and then attempting or threatening suicide while locked in a juvenile detention center.
For a much more comrehensive analysis of the possible impact of the closing of the CCCA, please see: http://www.nami.org/Content/Microsites197/NAMI_Northern_Virginia/Home184/News2/CCCA_Proposal.doc , written by a mental-health professional and staff member at the Center. This report, entitled, “Closure of CCCA: Possible Impact of Virginia’s Behavioral Health System of Care for Children and Families, outlines with specific data the fears of psychiatrists, psychologist, social workers and other mental-health professionals all over the state of Virginia. I will attach a copy of this paper after the close of this letter.
I, myself, am a former staff member of this hospital, who has been permanently disabled as the result of an attack by a violent adolescent at the CCCA – (previously, DeJarnette Center) – almost 11 years ago. I know first-hand the complexities and challenges of treating and caring for such difficult to manage children, which the Center routinely admits, when no other facility will have anything to do with them. A few of the more extremely violent and unpredictable adolescents have wound up having to be “placed”, upon discharge from the CCCA, in out-of-state hospitals and other facilities as far away as Florida, Colorado, and other equally distant points; after being refused admission to any and every other facility within the state of Virginia.
One common misconception is that the Commonwealth Center “warehouses” children. In reality, the average length of stay for a child admitted to the Center is less than a month; and often only a few weeks. The Commonweath Center for Children and Adolescents might well be thought of in terms of the emergency room and the intensive care unit of a general hospital, all rolled into one. Such an analogy would be accurate. No one would begin to suggest that the ER and ICU of a general hospital be shut down, and their patients transferred to general wards of the facility. This is exactly what the Governor of Virginia is proposing to do, in closing the CCCA.
What makes this story even more controversial, however, are the questions that are now being raised as to the validity of the Governor’s reasons behind closing the facility. Many people believe that the closing of the Center is not so much about addressing the State’s budget shortfall as it is about the commercail value of a little 28-acre tract of land, atop a small hill adjoining the intersections of Interstate-81, exit 222 and Va Rt 250, which happens to be the property that the CCCA was built upon, just 12 short years ago.
On the same 12/17/08 December day that the Governor announced that – along with his other State budget cuts – the CCCA would be closed by June 30, and that it would stop accepting admissions effective immediately; officials of the city of Staunton announced in a press conference that an deal had been struck between the City and State for the building of a new $130 million Western State Hospital, (one of the State’s many psychiatric hospitals for adults.
The aging WSH – whose current 300+ acre property adjoins that of the Commonwealth Center, (but is mostly low-lying land that sits back in from these two major highways) – will be replaced, with the new facility being built in a new location, a few miles away. The State of VA will put up the first $110 million, with constructon to begin right away in 2009, while the current hospital’s 300+ acre property will be “sold” to the city of Staunton, in that the city has agreed to “kick-in” the remaining $20 million on the project when it is nearing completion in 2010.
Staunton plans to put the property out for bids early in the new year to commercial developers, and anticipates the land becoming an enormous “mixed-use” commercial retail shopping area, with retail stores, restaurants and lodging facilities. City official deny having had any knowlege of the closing of the CCCA, but during the 12/17/08 press conference, City Director of Economic Development and Tourism Bill Hamilton stated: “The closing of the Commonwealth Center has been a surprise but, given the location of its campus, we would anticipate talking with the State about its possible inclusion in this project”. Whether this small town at all needs another such retail shopping complex raises serious questions. There is a Wal-Mart Supercenter and Lowes within a mile or so from the entrance to WSH/CCCA, and the Staunton mall is within about 3 miles or so.
This author believes that the city is attempting to retrieve customers who’ve been drawn away from shopping in Staunton by a new Target/Bed Bath & Beyond, etc strip mall that has recently been opened in Waynesboro, a smaller city nearby, and Staunton’s closest neighbor. Staunton only has a population of about 24,000. It was just recently announced on a national news piece on TV that the country currently has approximately twice the number of retail shopping malls that it can profitably sustain. This plan has been called by some, a “White Elephant”.
The point is that the CCCA – sitting atop its little hill, and looking more like a small, modern community-college satellite than a mental-health facility – is located right on the corner of the intersection of these two major arteries to Staunton, and is clearly visible from miles away on I-81, as well as Rt 250. In addition, the intersection of Interstate highways I-81 & I-64 is also within sight of the Center.
This key piece of land is probably the most valuable little tract of land anywhere in the area. Whereas the State is selling the 300+ acre WSH land to the city of Staunton for $20 million; from the Governor’s own 2009 budget proposal it states that the Center’s 28-acre piece of land is expected to fetch $12 million, which amounts to seven times per acre what the WSH land is being sold for.
Aside from being a key location for commercial development and for use as a “signpost” for the new shopping extravaganza; it seems fairly certain that the city of Staunton – which reportedly wants to retain complete control over just how all of this land will be developed – surely does not want to have a children’s mental-health facility in the middle of their new commercial shopping complex.
Additionally, at a time when the State is in such dire financial straits as to be “forced” to close its only child and adolescent mental-health facility, it at the same time has found approx $15 million in grants for “financial assistance” to 2 worldwide computer memory chip manufacturers that have factories within the state – Micron Technology, Inc (NYSE: MU) and Qimonda, LLC (NYSE: QI) – which amounts to approximately 1 1/2 times the annual operatiing budget of the CCCA. These 2 Grants – 8/15/08: voucher# 5025N for $11,750,000.00 to Qimonda; and 9/22/08: voucher# 5033 for $3,720,000.00 – are listed under “Grants to Intergovernmental Agencies”. This information can be verified by the Auditor of Public Accounts website, on which the information is listed.
For more information on this topic please follow the link: http://www.nami.org/Content/Microsites197/NAMI_Northern_Virginia/Home184/News2/CCCA_Proposal.doc
I do not think that change for the same of change is the answer especially in the UK where psychiatric service delivery is being transformed. Managers are closing beds indiscriminately and starting more and more community services (e.g. assertive outreach, crisis teams) which have no evidence base. Now they are being divided further into inpatient and community services with different consultants in charge; this is happening at the cost of continuity of care for the patients and there is no one out there to stop it. However, some brave researchers, Roger Singh & Aamer Sarfraz (2009), are leading the change against this trend by demonstrating the hidden flaws and cost of this futile exercise.
Similarly, I feel it is about the quality of service and it does not matter whether is public or private.
[...] different than a toll road partnership, which is in turn a lot different from a partnership to modernize a state psychiatric hospital. Virginia’s undertaken these and many other types of PPPs over the last two [...]